A Clean Energy Deployment Administration: The Right Policy for Emerging Renewable Technologies

Article excerpt

Synopsis: A Clean Energy Deployment Administration (CEDA) or "green bank" has the potential to direct responsible government incentives towards a group of critical clean energy technologies that currently lack much-needed government support - "emerging" technologies that are proven at the demonstration level, but due to a lack of access to financing and proven track record have yet to be deployed at a commercial scale in the U.S. This type of government support is essential in the path towards creating renewable technologies that can compete in the market with conventional power generation and contribute to a material reduction in future carbon emissions. This article explains why emerging technologies are the right target for CEDA support and provides principles that should inform the passage and implementation of a CEDA program. These principles include the need to ensure CEDA supports low-carbon technologies and that the program operates within the confines of reasonable taxpayer and risk management protections. The authors look to the Department of Energy Title XVII Loan Guarantee Program experience to enlighten these principles. This article should be useful for those engaged in energy finance, in both the public policy and private legal and investment sectors.

I. INTRODUCTION

The existential threat of climate change has made the transition to a low carbon economy a national and global imperative. This imperative requires a complete transformation in American energy policy, which, since about the time of the Industrial Revolution, has prioritized the availability of affordable fossil fuel-derived power as a driver of American economic growth. The Intergovernmental Panel on Climate Change (IPCC) has analyzed an "ambitious but achievable" set of policies to cause a 50-85% reduction in international greenhouse gas (GHG) emissions by 2050 (as compared with 2000 levels), the reduction level likely required to avoid some of the most severe and permanent potential impacts of global warming.1 In light of the Department of Energy?s domestic reference case predictions of a 9% increase in energy-related carbon dioxide emissions above 2008 levels by 2035 and insufficient increases in renewable energy generation and efficiency over the same period, the United States cannot currently ensure our country achieves its proportionate share of the global emissions reduction target to avoid crossing an irreversible threshold of global atmospheric carbon concentration.2 Government intervention to support the deployment of renewable energy is imperative in our attempts to stave off disastrous climate change, and this intervention must also begin to create a level playing field for renewable energy sources. Congress has heavily subsidized the extraction, processing, and infrastructure that support the production of fossil fuel electricity so that coal, oil, and natural gas remain available at a relatively low cost. Such energy sources account for over 85% of energy consumed in the U.S.3 In recognition of this support and its impacts, President Obama has proposed "eliminating [twelve] tax breaks for oil, gas, and coal companies; closing loopholes that would raise nearly $39 billion over the next decade."4 The fossil fuel industry further benefits from the fact that the costs of carbon emission continue to be externalized in the absence of a carbon price. Renewable energy and efficiency technologies, by contrast, have not benefited from a similar long-standing, multi-layered subsidy system that has leveraged decades of massive private conventional generation investment. Therefore, the renewable power sector has had difficulty competing, cost-wise, with fossil fuel generating capacity.

Given the gravity of the threat posed by climate change and the aforementioned subsidies, the current low-carbon demand drivers will not be enough on their own to deploy the magnitude of efficiency and renewable energy resources required to achieve the emissions savings the IPCC has deemed critical. …